Replacement Cost versus Actual Cash Value
For loss coverage under a typical homeowners policy, the insurer will pay the greater of:
1) Actual Cash Value, or
2) Replacement Cost Formula
[Insurance carried/Insurance required x Loss] less deductible= amount paid by insurance
Peter owns a home with a current replacement cost of $300,000. His homeowners policy has an 80% coinsurance covering the home for $216,000 with a $1,500 deductible on all perils. A fire in the home caused $25,000 of covered damages. How much will the insurance company apportion for this loss?
Replacement Cost ($300,000) x Coinsurance (80%)= Insurance required ($240,000) [Insurance carried ($216,000) divided by Insurance required ($240,000)] times the loss ($25,000) less the deductible ($1,500) equals the Amount paid by insurance ($21,000)
Which of the following are exclusions that apply to an HO-3 policy?
III. Intentional Loss
A. I only
B. I and II only
C. I and III only
D. I, II, and III
Neglect and Intentional loss are two of the eight general exclusions.